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During the Great Depression, the New Deal program known as the Agricultural Adjustment Act (AAA) paid certain farmers not to grow corn, wheat, cotton, rice, peanuts, and tobacco in order to control their supply and drive up their prices. The money paid to farmers came from a tax imposed on processors of farm products. In the Soviet Union that was called central planning; in the United States it was called giving farmers “parity.”

In the case of United States v. Butler (1936), the Supreme Court ended this nonsense by declaring the AAA unconstitutional. Said Justice Owen Roberts in the majority opinion he authored,

The act invades the reserved rights of the states. It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government. The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan. They are but means to an unconstitutional end.

But paying farmers not to plant crops is not the only thing the government pays for and gets nothing in return. On some days, the pilots with Great Lakes Airlines fly out of the Ely, Nevada, airport for Las Vegas without any passengers and the government pays them to do it.

The Ely airport is one of the rural communities where airlines get subsidies from the Essential Air Service program. According to the federal statistics reviewed by The Associated Press, only 227 passengers flew out of the Ely airport last year, paying just $70 to $90 for a one-way ticket. The cost to taxpayers for each ticket amounted to more than $4,000.

Because the airlines get paid per flight instead of per passenger, planes sometimes take off from Ely and other rural airports, such as the one serving Jackson, Tennessee, without any passengers.

The Essential Air Services program was created after airlines were “deregulated” in 1978 in order to ensure service on less-profitable routes to remote communities. Like any other federal program, it has grown in size and cost. Ten years ago, only 89 rural areas received the subsidies (68 in the continental United States, 20 in Alaska, and 1 in Hawaii) at a cost to taxpayers of about $50 million a year. The number of airports is now up to 153 and the cost to taxpayers is now about $200 million a year. About a dozen airlines receive subsidies.

In the recent bill (H.R.2553) that authorized another short-term extension of funding for the Federal Aviation Administration (FAA), Congress revised the eligibility requirements to limit service to airports (except in Alaska) that are “located at least 90 miles from the nearest medium or large hub airport” and “had an average subsidy per passenger of less than $1,000 during the most recent fiscal year.” Thirteen airports will be affected.

However, the bill also gives the secretary of Transportation the authority — at his discretion — to waive such requirements for a particular location if its “geographic characteristics result in undue difficulty in accessing the nearest medium or large hub airport.” It should come as no surprise that Department of Transportation officials say that Secretary Ray LaHood will use his authority, essentially negating the cutbacks.

Only six Republicans in the House voted against the bill. It was approved by unanimous consent in the Senate.

House Democrats generally opposed the bill because of the minuscule and potential cuts it made to the Essential Air Service program. But the overwhelming Republican support for the bill does not mean that they are opposed to the subsidies of the program.

Representative Glenn Thompson (R‑Penn.), whose district includes two airports to be cut out of the program, maintains that “he’s as fiscally conservative as anyone,” but he “insists these subsidies give taxpayers a good return on the investment.” Added Thompson, “If you believe that the federal government has a role in interstate transportation, that’s not just roads; that’s also air travel. So I obviously disagree with the individuals who do not support rural America, and do not support rural airports. Under their philosophy, maybe we shouldn’t even be paving roads in rural America, because there are fewer people that drive on them.”

Representative David McKinley (R‑W. Va.), who was elected with the help of the Tea Party, describes himself as “a small-government, free-market-focused owner of a small business,” but said airports that receive subsidies “serve as crucial engines of job creation for many small towns and rural areas.”

This shows once again that Republicans are not opposed in principle to government subsidies and unconstitutional federal spending. It just has to be the subsidies and spending that they want. If Republicans were really serious about gutting the Essential Air Service program instead of making some symbolic cuts, they had more than four years to do it when they controlled the House, the Senate, and the White House when George W. Bush was president.

Should the government have “deregulated” the airlines in 1978? Of course. Should it have instituted the Essential Air Service Program? Of course not.

The Airline Deregulation Act of 1978 removed government control over airline fares, routes, and market entry of new airlines and phased out the regulatory authority of the Civil Aeronautics Board (CAB), which had regulated all domestic interstate flights since 1937 by setting fares and approving routes and schedules. The elimination of the CAB is one of the few examples in U.S. history of a federal agency’s actually being abolished. The government had no business regulating the airline industry in the first place — just as it had no business regulating the railroad industry, the trucking industry, or any other industry. And just as it has no business regulating baby cribs, food, or football helmets.

Government subsidies of any kind to any business, industry, or individual for any reason infringe upon the principle of limited government and are a blatant violation of the Constitution. (Subsidies should not be confused with tax credits.) It is simply not the purpose of government to subsidize anything. It is nothing more than the forced transfer of income from one segment of society to another.

If an airline can’t turn a profit flying in and out of a rural airport, then it should cancel service to that particular airport. If someone lives in a rural area without an airport, then he should drive to an airport in the nearest city.

There is nothing inherently different about the airline industry that justifies government subsidies. If Home Depot can’t make a profit by opening a store in some small town, then that town’s residents will have to drive to a larger town if they want to shop at Home Depot. There is no right to live in a rural area or small town and have access to every type of product, service, store, business, and industry that one finds in a city or major metropolitan area.

And if the government should subsidize flights at rural airports, then why should it not also subsidize the availability of lobster, sports stadiums, Cadillac dealers, and fine French wine in every small town? And how do government bureaucrats know which rural airports to subsidize, how much the subsidies should be, who should get the subsidies, what conditions should be attached to the subsidies, and how long the subsidies should last? The process is always political in nature.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.